Towards an efficient and sustainable tariff methodology for the European gas transmission network (original) (raw)
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2021
In line with the EU vision for a carbon neutral economy by 2050, the role of gas in the energy mix is expected to change considerably over the coming years – not only will gas volumes be shrinking, but more profoundly, gas generation and consumption will be transformed. Such changes have wide reaching implications for the sector, including the suitability of infrastructure and allocation of its costs to different uses. The current EU tariff model of charging on the basis of consumption well supported the transition from a vertically integrated organisation of the gas industry, to a single liberalised market. However, if the network persists with this approach the recovery of its costs will be based on charges on an increasingly small number of consumers. Moreover, as regions decarbonise at different speeds or choose different energy pathways, these dynamics will develop differently across the EU. Redesigning the tariff charging methodologies can avoid these potentially unfair alloca...
Tariff approach to regulation of the European gas transportation system: Case of Nord Stream
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Nord Stream 2 is one of the most discussed energy projects, which affects the economic and political interests of many countries, not only the direct participants. Despite some uncertainty, the project is highly likely to be completed. In this regard, it is important to understand what impact it will have on the European gas market. This article proposes a simulation model for calculating the total cost of construction of the Nord Stream 2 and determines the cost of natural gas. It was concluded that Nord Stream 2 has an economic advantage overliquified natural gas (LNG) delivery schemes, a strategic value for the economies of the EU countries and will ensure the stability of gas supply, which is undoubtedly a priority for European energy policy.
2014
The present work introduces the main regulatory issues faced nowadays in EU by policy-makers in the design of the electricity and natural gas markets. The dissertation consists of the following parts: Chapter 2 introduces the new challenges that are currently engaging the European markets, under the perspective of the stronger integration expected in the next years. The coordination of the investments in new facilities and the rules governing their access, the increasing need of flexible resources as well as the integration of spot and forward markets will be some of the themes examined in this first section. Chapter 3 focuses on the regulatory interventions aimed at increase the flexibility of the storage services in the Italian gas market. A first part of the work is devoted to describe the storage technologies, the services they provide and their current regulatory framework. The rest of the chapter discusses the main issues related to the elicitation of flexible resources and th...
Journal of Regulatory Economics, 2020
In Europe, gas market mergers aim at reducing restrictions on gas wholesale markets. Market mergers also allow network users to book transport capacity at different gas transmission system operators (TSOs), which may give rise to inter-TSO competition. Our theoretical analysis reveals the incentive for TSOs, operating under a revenue-cap regulation in merged markets, to charge lower tariffs at borders where different TSOs offer capacity, compared to borders where only one TSO offers capacity. This incentive does not directly result from revenue-cap regulation but is due to efficiency benchmarking. We test this hypothesis by applying a panel data analysis to tariffs charged at German border points between 2015 and 2018. In line with our hypothesis, we find lower tariffs at those border points where network users have a choice between different TSOs. An additional sensitivity analysis differentiating between transit and meshed networks confirms this result. We conclude that German TSO...
SOM Research Reports, 2019
In Europe, gas market mergers take place to reduce restrictions between gas wholesale markets. After a merger, transport capacity of multiple gas transmission system operators (TSOs) may be offered as substitutes, which may result in competition among TSOs. Based on a theoretical analysis, we determine the optimal set of tariffs for TSOs considering different regulatory regimes. Applying a panel data analysis to tariffs charged at German border points between 2015 and 2018, we find lower tariffs at those border points at which network users have a choice between different TSOs. A differentiation between transit and meshed networks does not provide a sufficient explanation for this finding. Further research is required to analyse how TSOs consider the existence of substitutes for network users in setting tariffs.
Electricity Tariff Design in the Context of an Ambitious Green Transition
2021
Current tariff designs do not incentivize efficient or equitable responses by active customers adopting renewable self-generation or providing flexibility in a future fully decarbonized electricity system. This chapter revises current practices in Europe and, based on the revisited principles of efficiency and equity, proposes a first benchmark for tariff design. Forward-looking peak-coincident network charges that reflect network incremental costs and fixed charges that collect residual network costs and policy costs are recommended. No one-size-fits-all model exists, in practice. These are guidelines for regulators when dealing with the trade-offs between the tariff legacy and the new requirements imposed by this energy transition.
2000
Price regulation, limited to monopoly segments*, to target EE-DSM programme cost recovery; Direct revenues from EE-DSM services Common components of each combination: • Price regulation, limited to monopoly segments*, to avoid artificial incentives for increased sales • Other legal and technical support for EE-DSM services and programmes • Requirement to report on DSM results, using common evaluation methods * Distribution and transmission networks; supply to non-eligible customers Completing the Market for Least-Cost Energy Services Overview of the Study and this Report Wuppertal Institute et al. 1 Completing the Market for Least-Cost Energy Services Overview of the Study and this Report Wuppertal Institute et al. Foundations for the analysis Completing the Market for Least-Cost Energy Services Wuppertal Institute et al.
Chapter IX.47: Energy networks, natural monopolies and tariff regulation
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Energy networks, such as the networks for the transportation of electricity and gas, are natural monopolies, which implies that competition among these networks is not possible. In order to protect network users against monopoly prices and to give the network operators the incentive to operate efficiently, many countries have implemented tariff regulation. After discussing the economic consequences of natural monopolies and the need for regulation, this chapter briefly compares the various types of tariff regulation, discussing the incentive power, the ability to make a profit, and the reward on the costs of capital. The chapter concludes by discussing how tariff regulation may enable network operators to finance the necessary investments to connect new renewable energy production facilities.
European transmission tariff harmonization: A modeling analysis
2012
The Single Electricity Market (SEM) target model envisages zonal market price coupling across Europe by 2014 as well as harmonization of transmission tariffs of the coupled countries. To date the majority of EU countries have uniform transmission charges with the exceptions of a few countries, which have geographically varying tariffs. This paper presents a robust modeling methodology for evaluating transmission charging arrangements and analyses two options for transmission pricing, namely uniform and locational transmission charges, by evaluating the economic efficiency of each tariff and how it affects integration of low-carbon energy sources. Our modeling framework combines investment and operational wholesale power market models with models of transmission investment and charging. We have used our methodology to compare the development of the Great Britain electricity system to 2030 under the two different charging regimes. Our analysis demonstrates that moving from the current locational to a uniform transmission charge would incentivize generation to locate in more remote parts of Great Britain. This in turn would drive significantly higher transmission investment costs and losses leading to reduced social welfare. At the same time, we find no significant difference in performance between the two charging regimes in terms of CO2 emissions and the achievement of the UK target for 30% of renewables in electricity consumption by 2020.